Too Little Time – Court Finds ERISA Plan’s Contractual Limitation Period Unreasonably Short and UnenforceableNovember 04, 2014 Robert McKennon
One hundred days is not a reasonable amount of time to give a plan participant to file a lawsuit under the Employee Retirement Income Security Act of 1974 (“ERISA”). This was the conclusion reached by the United States District Court Southern District of California in its recent decision in Nelson v. Standard Insurance Company, 2014 U.S. Dist. LEXIS 119179 (S.D. Cal. Aug. 26, 2014), which held that a contractual limitation contained in an ERISA-governed group long-term disability policy’s limitation period is unreasonable and unenforceable because the time period may have ran prior to the end of the administrative review process and because it provided the plan participant only one hundred days to file an action in federal court. The holding in Nelson was one of the first in the Ninth Circuit to determine, in the wake of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), that a plan’s contractual limitation on filing a lawsuit is unreasonably short. While numerous questions still remain as to what constitutes an unreasonable plan limitations period, the Nelson decision makes it clear that, at the very least, providing a plan participant only one hundred days within which to file a complaint in federal court is not reasonable.
Court Allows Mandamus Claim Against the California Department of Insurance Regarding Disability Insurance DisputeOctober 28, 2014 Scott Calvert
There is a commonly held belief that every disability insurance policy sold to the public has been actually reviewed and approved by the California Department of Insurance. Indeed, California Insurance Code section 10291.5 requires the Insurance Commissioner to reject a proposed new disability insurance policy form if it does not meet certain requirements set forth in the Insurance Code. However, prior to the recent ruling of Ellena v. Department of Insurance, 2014 Cal. App. LEXIS 883 (1st Dist. Oct. 1, 2014), the California Department of Insurance was not following this code provision, and in fact maintained that it did not have a duty to review each new disability insurance policy form. There is now no question that the Department of Insurance has a mandatory duty to review all new disability insurance policy forms that insurers wish to sell in California.
Recent Federal Court Decisions Give Teeth to California’s Ban on Discretionary Clauses in ERISA PlansAugust 28, 2014 Robert McKennon
A virtually insurmountable concrete wall was once an apt analogy for the effect of discretionary clauses in ERISA Plans on claimants attempting to challenge a plan administrator’s unreasonable interpretation of policy terms. A valid discretionary clause gave insurance companies power to construe the terms of ERISA- governed group insurance policies based on their own interpretation, which could only be overturned by courts if it were “illogical, implausible or without support in inferences drawn from the facts in the record.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (2011). In order to counteract the discretion these clauses provided to plan administrators/insurers, California enacted Insurance Code section 10110.6, which placed a ban on such discretionary clauses. After the enactment of this new statute, questions regarding how courts would interpret and enforce it lingered. However, recent decisions in California strongly suggests that courts will give full force to the California statute and apply de novo review of claim denials rather than the abuse of discretion standard to claims denied on or after January 1, 2012.
New California Law Requires that Short-Term Disability Policies Provide Coverage for Severe Mental IllnessAugust 05, 2014 Scott Calvert
In a victory for insurance consumers and mental health advocates, a recent change to the California Insurance Code mandates that short-term disability insurance policies provide coverage for “severe mental illnesses” as that term is defined in the Insurance Code.
Passed in 2013, and signed in to law by Governor Jerry Brown on October 4, 2013, Assembly Bill No. 402 (“AB 402”) added Section 10144.55 to the Insurance Code, effective July 1, 2014. Section 10144.55 requires that every disability insurance policy with “a short-term limited duration of two years or less,” provide coverage for disabilities caused by severe mental illnesses. Section 10144.55(b) defines “severe mental illnesses” as schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders (including postpartum depression), panic disorder, obsessive-compulsive disorder (OCD), pervasive developmental disorder (autism), anorexia nervosa or bulimia nervosa.
A disturbing trend that has developed across the country in recent years is that, while the number of workers/employees suffering from long-term illnesses or injuries has increased, the number of employers who provide long-term disability insurance has dropped dramatically. As of May 2014, the total number of Social Security disability beneficiaries in the United States hit an all-time high of about 11 million beneficiaries. However, fewer employees are covered with long term disability coverage. The number of U.S. workers with long-term disability coverage decreased 6% from 2009-2013. Below are just a few of the worrying statistics. From 2009-2013 nationwide:
- The number of employers offering long-term disability coverage decreased from 220,000 to 213,000;
- The number of employees who have long-term disability coverage decreased from 34 million to 32.1 million (6% decline); but,
- The number of employees in the U.S. workforce has increased by 6.6 million.
More and more employers are opting to drop their standard disability insurance plans for optional employee-paid plans. Additionally, more companies are implementing “defined benefit plans,” which allocate a certain amount of funds for each worker to use for all insurance coverage. This often has the effect of forcing workers to forgo some types of coverage, such as long-term disability insurance, because the funds provided are not sufficient to cover all types of insurance.
Why Is It Important To Exhaust Your Administrative Remedies Under ERISA When Your Insurer Denies Your Disability Insurance Claim?June 16, 2014 Robert McKennon
The Employee Retirement Income Security Act of 1974 (“ERISA”) provides an exclusive remedial scheme for insureds who have been denied benefits. 29 USC section 1001 et seq. Under ERISA, a plan participant may sue “to recover benefits due to him under the terms of their plan, to enforce their rights under the terms of the plan, or to clarify their rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). However, before plan participants can pursue a lawsuit against the plan/plan administrator for benefits, attorneys’ fees and costs, they must first pursue their ERISA appeal rights under the doctrine of exhaustion of administrative remedies. 29 USC section 1133. If they do not do so, they may lose all of their rights to pursue an appeal or litigation of a disability, life or health insurance claim denial.
A Pro-Insurer Decision Provides Guidance for Insureds on the Application of Estoppel and Waiver to Statute of Limitations Defenses in Disability Insurance ERISA CasesApril 24, 2014 Robert McKennon
At times, decisions that appear favorable to insurers can also have unexpectedly positive take-aways for policy holders. Gordon v. Deloitte & Touche, __ F.3d ___, 2014 U.S. App. LEXIS 6688 (9th Cir. April 11, 2014) is just such a case. Although, the Ninth Circuit in Gordon ruled in favor of the insurer in finding that the insured’s ERISA action was barred by the California four-year statute of limitations, the Court also reaffirmed and clarified the standards for evoking waiver and estoppel arguments to prevent insurance companies from raising a statute of limitations or contractual limitations defense.
ERISA Administrator Must Show That a Theoretical Job Actually Exists in Order to Serve as Justification for Claim DenialMarch 10, 2014 Scott Calvert
A common justification for denying a claim for long-term disability insurance benefits or short-term disability insurance benefits is that the claimant is capable of returning to work in another job. However, insurers / ERISA administrators are not allowed to deny a claim just because an insured might be capable of returning to any job, rather the identified job must be based on the insured’s education, training and experience. Further, the occupation must be “gainful,” which usually means that it pays the insured at least 50%-60% of his or her pre-disability income. In Kennard v. Means Industries, Inc., 2014 U.S. App. LEXIS 2846 (6th Cir. Feb. 13, 2014), the Sixth Circuit imposed another important requirement — the insurer must prove that the theoretical job actually exists.
Do you have a disability insurance policy, health insurance policy or life insurance policy through your work? If you do, you should read this article as you may miss some important deadlines if you do not.
The Supreme Court’s recent holding that the limitations periods in employer-sponsored plans are enforceable, even where such limitations periods began to run before a cause of action accrued, had a rippling effect through federal courts, the insurance bar and participants alike. Under the Employee Retirement Income Security Act of 1974 (“ERISA”), participants must exhaust the plans’ administrative process before bringing suit. Previously, the Ninth Circuit and majority of circuit court of appeals had held that the statute of limitations for filing suit under ERISA commenced after an insured exhausted all administrative remedies. However, the high court explained that a plan may impose a particular limitations period, which begins from the date proof of claim is due, rather than after the conclusion of the administrative process. Heimeshoff v. Hartford Life & Accident Insurance Co. et. al., 134 S. Ct. 604 (2013). Below, we examine the implications Heimeshoff has for insureds and provide helpful tips.
California District Court Rules That a Treating Physician's Observations are "More Persuasive" Than a Paper Reviewer's Contrary OpinionsFebruary 13, 2014 Scott Calvert
When reviewing a claim for disability insurance, insurers and other claim administrators often rely on the opinions of paid physicians to support their improper denial decisions. For example, a disability insurance company will hire a doctor to conduct a “paper review” – that is, reviewing an insured’s medical records, without actually examining the insured – and then offer an opinion on the insured’s ability to return to work. If the “paper reviewer” opines that the insured is capable of returning to work, the insurance company will then rely on that opinion to deny the claim for benefits; even if the insured’s own treating physicians repeatedly state that the insured is disabled. However, in Oldoerp v. Wells Fargo & Co. Long Term Disability Plan, 2014 U.S. Dist. LEXIS 9847, 2014 WL 294641 (N.D. Cal. Jan. 27, 2014), the court held that with a psychological disability, a treating mental health professional’s observations are “more persuasive” than a paper reviewer’s opinion. This opinon is beneficial for policyholder/insureds, espeically in ERISA cases, because insurers will have a harder time using the opinions of paid, so-called “experts” who do not examine the insured to support their improper claim decisions.